Correlation Between CITIC Resources and Base Resources

Can any of the company-specific risk be diversified away by investing in both CITIC Resources and Base Resources at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CITIC Resources and Base Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CITIC Resources Holdings and Base Resources Limited, you can compare the effects of market volatilities on CITIC Resources and Base Resources and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CITIC Resources with a short position of Base Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC Resources and Base Resources.

Diversification Opportunities for CITIC Resources and Base Resources

0.55

Correlation Coefficient

CITIC Resources  Base Resources

Very weak diversification

The 3 months correlation between CITIC and Base is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Resources Holdings and Base Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Base Resources and CITIC Resources is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CITIC Resources Holdings are associated (or correlated) with Base Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Base Resources has no effect on the direction of CITIC Resources i.e., CITIC Resources and Base Resources go up and down completely randomly.

Pair Corralation between CITIC Resources and Base Resources

If you would invest  20.00  in Base Resources Limited on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Base Resources Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CITIC Resources Holdings  vs.  Base Resources Limited

CITIC Resources Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC Resources Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, CITIC Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Base Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Base Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Base Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CITIC Resources and Base Resources

The main advantage of trading using opposite CITIC Resources and Base Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC Resources position performs unexpectedly, Base Resources can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Base Resources will offset losses from the drop in Base Resources' long position.

The idea behind CITIC Resources Holdings and Base Resources Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.